In today’s market, you observe the following yield curve for government securities: Assume that the pure expectations hypothesis holds (i.e., the maturity risk premium = 0).  What does the market expect will be the interest rate on 2-year securities three years from now?  You may solve this problem using either the algebraic or geometric approach.

Reinhardt Industries is a mature company experiencing a constant growth rate of 4.5%.  The firm has just paid a dividend of $3.60 (that is, D0 = $3.60).  Investors require an 11% rate of return on the stock.  What is the firm’s stock price today?  NOTE: Since the $3.60 dividend has already been paid, its value should not be reflected in the firm’s stock price.  

yesterday

to answer

to receive

sometimes

to congratulate

tomorrow

to be big

summer